Facebook said on Tuesday that it now gets 14 percent of itsadvertising revenue from mobile ads, helping to reassureinvestors that the social network is beginning to figure out howto earn money off smartphone and tablet users.

Mobile ad revenues totalled roughly $150 million, up from anestimated $40 million to $50 million in the second quarter andalmost nothing in the first.

"This certainly dispels the most bearish view, that Facebookcouldn't monetize people on phones or tablets," said ColinSebastian, an analyst with Robert Baird & Co.

"In about a six-month period they've actually started togenerate decent revenues form their mobile applications,"Sebastian added, though he said Facebook still needs to showthat its mobile ads can command the same rates as itstraditional ads and that they can deliver results for marketers.

Mobile advertising has been among the key investor concernshanging over Facebook, helping slash more than $40 billion offits market value since its May IPO. As its users increasinglyaccess the social network with their smartphones, Facebook hasstruggled to transition its business to mobile devices.

The mobile ads helped reignite Facebook's overalladvertising business during the third quarter, following severalconsecutive quarters of slowing revenue growth that raisedquestions about Facebook's long-term prospects.

Advertising revenue increased 36 percent to $1.09 billion,up from 28 percent growth in the second quarter. B ut revenuefrom its payments and other businesses increased just 13 percentto $176 million.

Mark Zuckerberg, the 28-year-old chief executive who createdFacebook in his Harvard dorm room, said mobile was the "mostmisunderstood aspect" of the company and took issue with the"myth" that Facebook could not earn money on mobile.

"Over the long run we're going to see more monetization pertime spent on mobile than on desktop," Zuckerberg said on aconference call with analysts on Tuesday.

Facebook said it had crossed the 1 billion threshold formonthly active users by Sept. 30, of which 604 million weremobile users, a gain of 61 percent from a year earlier.

The shift to mobile has challenged many of the Webindustry's top companies. Google Inc is the No.1provider of smartphone software with its Android operatingsystem. But the company missed Wall Street's revenue targets inthe third quarter, with some analysts blaming the shortfall onits increasing reliance on lower-priced mobile ads.

Social game maker Zynga Inc, which announcedlayoffs of 5 percent of its staff on Tuesday, has suffered as itstruggles to translate its hit games to mobile devices and asthe use of its games on Facebook's service declines.

NOT PLEASED WITH GAMING

Zynga's woes were visible in Facebook's results, withFacebook's payments revenue from the maker of Farmville down 20percent year on year.

Zuckerberg said he was not pleased with revenue from gaming,but said that beyond Zynga - which accounts for 7 percent ofFacebook's total revenue - the situation was brighter.

"The interesting thing is that the rest of the gamesecosystem has actually been growing. Our monthly paymentsrevenue from the rest of the ecosystem increased 40 percent overthe past year, since payments has been adopted," he said.

Zuckerberg also said Instagram, the photo-sharing app thatFacebook acquired for roughly $750 million this year, now has100 million users, up from 27 million when Facebook bought thecompany.

Facebook posted a net loss of $59 million or 2 cents a sharein the three months ended Sept. 30 after booking a big provisionfor income taxes. Excluding share-based compensation and incometax adjustments, it earned 12 cents a share, a penny higher thanthe average analyst expectation.

Facebook Finance Chief David Ebersman said the company wouldcontinue to invest aggressively during the fourth quarter,though the company did not provide a specific financial outlook,in keeping with its previous practice.

Ebersman said that the total number of ads that Facebookdelivered in the third quarter increased 27 percent year-on-yearand that the average price per ad increased 7 percent.

Facebook's third-quarter mobile revenue marked a big jumpfrom the second quarter, when Facebook said that it wasgenerating more than $1 million a day from a new class of adsthat appear in users' newsfeeds. Facebook said that roughly halfof that revenue was from mobile ads, suggesting that mobileadvertising revenue totaled $45 million in the second quarter.

Stifel Nicolaus analyst Jordan Rohan said that Facebook'smobile ad revenue was impressive, but said that Facebook needsto proceed carefully so as not to damage the user experience byoverloading its service with too many ads.

And he said that Facebook's desktop PC advertising businessappeared to have shrunk by about $40 million from the secondquarter. Rohan said he would rather see the desktop ad businessremain stable as the mobile ad business grows.

Facebook's third-quarter revenue of $1.26 billion was a hairabove the average analyst expectation of $1.23 billion,according to Thomson Reuters I/B/E/S.